Good Credit is a Necessity, not a Luxury.

Key Factors That Affect Your Credit

Payment History 35%

Lenders want to know how you have handled your accounts in the past. Such accounts analyzed are credit cards, retail store
accounts, installment loans, finance company accounts and mortgage loans.

The things lenders look for specifically are:

How late your payments were (30, 60, 90 days.) *According to Fair Isaac. "A 30 day late
payment made just a month ago will count more than a 90 day late payment from five years ago".

How much was owed at the time of delinquency and are there outstanding balances.

Collection items and public records. Public record items include: judgments, bankruptcies,
lawsuits, liens and wage attachments. Most of these are considered quite serious, although older items will affect
the score less than the most recent ones.

The amount of negative items as compared to your total amount of available credit. For example,
5 accounts showing 3 late payments is much worse than 10 accounts showing 4 late payments. One of the biggest sub factors
is how many accounts show no late payments. If you have a number of accounts and most show no late payments, your over all
credit score will increase substantially.

Amount Owed 30%

Lenders ask themselves "can the borrower pay me and still afford to pay their other bills?"

While owing a lot of money on many accounts might indicate that you are overextended, your FICO score will not necessarily be harmed by
large outstanding amounts. Paying off your credit cards in full every month does not mean that they won't show a balance on your report.
What is more important is how many accounts have balances and how much of the total credit line is being used on credit cards and other
"revolving credit" accounts. In an attempt to improve their credit scores, people sometimes make the mistake of closing down credit cards
accounts where they have small balances and consolidating their debt under one credit card. For example, take a credit card with a very
small balance and no late pays. Even though the balance is low, this still looks very good as it shows that you are able to manage your
credit responsibly and this reflects positively on your credit score. If you should close the accounts and consolidate all the debt on one
card that you nearly max out, this can actually worsen your score since the percentage of your lines of credit that is still owed would actually go up.

Credit History Length 15%

The length of time you've had or established credit is important. If you are simply trying to establish a credit record, you have few options
to improve your score. Most often, the longer the credit history the better your credit score. However, this only makes up 15% of your overall score. So even young people,
students and others with short histories can still have high credit scores as long as the other factors show positive results. Parents should take note that establishing a
credit record for your children before they go out on their own could give them a leg up when they apply for credit later.

Types of Credit 10%

This factor takes into account your mix of installment loans, mortgages, retail accounts, credit cards and finance company accounts. Fair Isaac, however,
is somewhat vague about how it weights your mix of account types. It does not indicate that this factor may be given less weight if the company has full information about your
other four factors. It is not a good idea to open different types of accounts simply to try and make this factor better. It will likely reduce your score in other areas. You should
never open accounts you don't intend to use.

When the credit bureaus deliver your FICO score to your lender, the score is also accompanied by what are called "reason codes." These codes explain what
factors lower you score. An example of a reason code is "number of accounts with delinquency." This particular code explains the number of accounts on your credit profile that show
late payments. Reason codes are important to examine since they indicate the best ways to improve your score.

Acquiring New Credit 10%

Even though this category makes up only about 10% of the total score, applying for too much new credit is probably one of the easiest ways for people to inadvertently
harm their credit score. Look at how many credit card offers you get via the Internet and postal mail. Here, the FICO model looks at how many new accounts you have established, how long it has
been since you opened a new account and how many recent requests for your credit have been made by credit reporting agencies. Fair Isaac states that if you request your credit report from one
of the credit reporting agencies (Equifax, Experian, TransUnion) it does harm your credit score since it is a "consumer-initiated inquiry," Until recently, your score would have worsened if you
applied for a number of credit cards or mortgages within a short period of time. Currently, Fair Isaac claims they lump together inquiries made within a short period of time as one inquiry. So if
you are shopping around, make your inquiries all within a few days if possible. (Note: this only applies to auto or mortgage loan inquiries.)

Buying A Home

A consumer with good credit can potentially save hundreds of thousands of dollars!
As an example, on a 30-year home loan of $225,000, a good credit rating allows a consumer
to qualify for an interest rate of 5.5% and a monthly payment of $1,278 with total interest
paid of $234,907. A lower credit rating could result in an interest rate of 7.5% and a monthly
payment of $1,573 with total interest paid of $341,366. In this example, good credit could help
you save more than $105,000 over the life of the loan.

Buying An Automobile

Good credit also leads to lower interest rates on car loans. Banks, car dealerships, and other
lending institutions can offers rates as low as 6% with good credit and rates as high as 16% with
poor credit.
Keep in mind, consumers with good credit can take advantage of extremely low financing (0% - 2.9%)
from auto dealerships directly.

Getting A Credit Card

Credit card companies generally offer their best deals and incentives to consumers who have proven they
can responsibly handle credit. Consumers with good credit scores can expect to get a low interest rate
credit card that includes perks such as a 0% introductory offer and cash back or rewards points on all
your purchases. We have selected the cards we believe offer the best value in terms of APR, annual fees,
and cash back or bonus point plans.

Building A Business

The majority of businesses are built on borrowing capital. Businesses often keep credit lines available for
everyday operations and/or emergencies. As with interest rates offered on credit cards, good credit allows
consumers to borrow capital for businesses at low, competitive rates.

Getting Insurance

Home and auto insurers may look at credit scores before deciding if coverage will even be offered, and then at what premium.

Several years ago, insurers decided there was a correlation between credit score and losses, and that people
with higher scores filed fewer claims. That's possibly because habits from responsible credit use - like paying
on time and refraining from taking on too much debt -- may carry over to responsible driving and homeownership.
Hence, the better rates for better scores.